Becker & Posner: Time To Minimize Patent & Copyright Law

from the shrink-shrink-shrink dept

Famed economist Gary Becker and appeals court judge Richard Posner have long teamed up to publish The Becker-Posner Blog, in which they pick key issues and each of them discuss the same issue in separate posts. It's a really great blog, and we've mentioned it in the past -- in a situation where we disagreed with Posner's suggestion that copyright should be expanded to help newspapers. More recently, we've noted that Posner's been very interested in patent issues, and has been somewhat vocal on how the system is mostly broken. So it's no surprise that patents are a recent topic on the blog.

Posner's contribution actually touches on both patents and copyrights, both of which he admits seem to be excessive, though (somewhat surprisingly) he argues that patents are a bigger problem. I get the sense that he hasn't spent that much time on copyright issues given some of the statements that he makes. Perhaps if he explores that issue more deeply he'll realize that some of the problems are just as, if not more, serious in copyright law.

Posner starts with the premise that IP works in cases where there are high capital expenditures for creation/invention, with low barriers to copying -- but that it doesn't work otherwise. There's increasing evidence that the premise is a bit faulty, and there are reasonable questions about whether or not patents and copyrights really are the best thing in those high capital expenditure cases, but his recognition that it barely works at all otherwise is welcome. He falls into the cliche of basically comparing pharma patents (which he claims works) to software patents (where they clearly don't work) -- and suggesting that it's merely about recognizing that the costs and benefits in different industries are different. His conclusion, though, is that the "costs" probably outweigh the benefits in most cases:

The pharmaceutical and software industries are the extremes so far as the social benefits and costs of patent protection are concerned, and there are many industries in between. My general sense, however, bolstered by an extensive academic literature, is that patent protection is on the whole excessive and that major reforms are necessary.

I think if he explores the issue more deeply, he'll realize that the different impact on different sectors is more a symptom of the problem with how the system is set up, rather than the problem itself.

On copyrights, he recognizes problems, but seems to think it's more limited, arguing that the law treats different industries differently (his basic suggestion for fixing patents):

For example, when
recorded music came into being, instead of providing it with the same copyright
regime as already governed books and other printed material, Congress devised a
separate regime tailored to what were considered the distinctive
characteristics of music as a form of intellectual property. Patent law could
learn from that approach.

That's a... generous retelling of copyright law. It is true that Congress has tried to duct tape on "fixes" to copyright law when innovation challenges the status quo, but it's also created newer and bigger problems, as the different "rights" start to overlap and blur together. Is a stream a performance, a distribution or a reproduction? All three? These things get complex fast... and in part it's because of Congress's constant patching without recognizing the longer term impact.

Posner also has this oddity:

The problem of copyright law is less acute than the problem of patent law, partly because copyright infringement is limited to deliberate copying; patent infringement does not require proof even that the infringer was aware of the patent that he was
infringing.

I think "deliberate" is a slightly sloppy word choice here. He's correct that copyright requires (mostly) actual copying, but it need not be "deliberate" in the traditional sense. Law prof. John Tehranian has famously covered just how much we accidentally infringe on a daily basis. Posner seems to be suggesting that to infringe on copyright, you know you're infringing. These days that is true for fewer and fewer cases. That said, he does still recognize some key problems:

Nevertheless, as in the case of patent law, copyright protection
seems on the whole too extensive... The most serious problem with copyright law is the length of copyright protection, which for most works is now from the creation of the work to 70 years after the author’s death. Apart from the fact that the present value of income received so far in the future is negligible, obtaining copyright licenses on very old works is
difficult because not only is the author in all likelihood dead, but his heirs
or other owners of the copyright may be difficult or even impossible to
identify or find. The copyright term should be shorter.

He also argues that a good solution would be a much broader and clearer definition of fair use -- something we agree would be helpful:

The problem is that the boundaries of fair use are ill defined, and copyright
owners try to narrow them as much as possible, insisting for example that even
minute excerpts from a film cannot be reproduced without a license.
Intellectual creativity in fact if not in legend is rarely a matter of creation
ex nihilo; it is much more often incremental improvement on existing, often copyrighted, work, so that a narrow interpretation of fair use can have very damaging effects on creativity.

The various harmful effects of the patent and copyright systems encouraged Arnold Plant, an English economist, to publish over 75 years ago two influential articles on why England and other countries would be better off without patents and copyrights. Among other things, he argued that the temporary monopoly power given to patent holders often led to inefficiently high prices and reduced output of patented goods, that many persons would continue to invent even if they could not patent their inventions, and that patents distort innovations in favor of goods and processes that can be patented and away from innovations that cannot be patented. His favorite example of the latter is basic research in the sciences that produced the theory of relativity, the theory of evolution, and in more modern times our understanding of DNA and genes. He believed that the patent system induced some creative scientists to work in areas that could be patented rather than on basic scientific research that could not be patented.

He notes that, in the end, getting rid of them entirely would upset too many apple carts, and he basically follows Posner's reasoning that high cap-ex + low barriers to copying should get protected, while everything else should be excluded:

Probably the best solution would be to maintain the patent system on drugs and a few other products that are expensive to innovate and cheap to copy, and eliminate patents on everything else. In particular, this means eliminating patents in the software industry, the source of much of the patent litigation and patent trolling.

He admits that he's not sure where to draw the line, and his best suggestion is to "start by eliminating the ability to patent software, and go on from there to prune the number and type of inventions and innovations that are eligible for patent protection." That seems to be an admission that there's a problem, but not a deep enough understanding to know how to fix the system. Once again, it seems like a case of targeting the symptoms rather than the cause.

All in all, I find that the argument from Boldrin & Levine about why the system should be done away with completely a lot more compelling. In that, they specifically note Posner's occasional blindness to the root of the problem, and his focus on symptoms. I'd like to believe this is a question of familiarity with the subject matter, actually. The solutions and ideas that Becker and Posner speak to are similar to what we often hear from people when they see the problems of the patent system, but haven't fully thought through the issues. One hopes that as they explore the details more thoroughly, that they might realize that the problems run deeper than they seem to believe.

tl;dr

I'm somewhat wary about completely eliminating any of those systems without a substitute or at least some gradual response. The idea of patents/copyright itself is to protect creations from commercial exploitation. As it is pointed out there are sectors where such protections are useful. The big issue today is how broad they are with very narrow exceptions and market interface.

I've been thinking about the pharmaceuticals. I read once about some sort of 'public fund' that would grant the creators of a formula with extra money but if other companies managed to produce it they would be free to do so, without the financial prize from said fund. Seems like some place to start although I see how it can be twisted and abused...

In the end any sane and practical discussion has to keep the lobby out. It is obvious nobody will accept less profits even though they'll still be there. The question is, how to build a balanced model without getting it poisoned by greed?

I fail to see why pharma -- assuming it is a case where exclusive monopolies work -- needs to depend upon patents as a means of administering such monopolies. Almost all pharmaceutical manufacturing and sale require approval by the FDA (Food & Drug Administration) and it would seem a much more efficient solution to adjust that approval process to provide the restrictive monopolies that supposedly fund research in that industry.

That is to say, the first company to file for approval of a new drug is granted a "head start" on marketing that drug; no other companies will receive approval on manufacturing unlicensed "copies" of that drug until after that period has expired. No need for patents or the Patent Office, and the Courts can be relieved of an increasingly crippling burden.

Re:

Using patents as incentives has some serious weaknesses, and some of the cracks in the system are beginning to show. Several recent drug patents are for minor adjustments to existing drugs, or for drugs which are only minimally better than existing medicines. A lot of drugs that are badly needed still go neglected because they will be major profit centers.

Drug companies have gotten extremely dependent on patents and the monopoly rents they can command. Even huge drug companies are now in danger of collapsing when a couple of patents expire. The industry has become complacent and relies on marketing rather than research to bolster quarterly profits and executive bonuses.

Re: Re: tl;dr

I read parts. It's just too long and going nowhere. This would have been probably better broken up into a few posts to promote discussion on each point. There is just too much here, and too much of Mike's rebuttal. It's just way too long to deal with, and certainly too much to make meaningful comment on, IMHO.

Re: Re: Re: tl;dr

Let me guess, you thought the instructions on how to make meaningful comments on the internet were too long and you didn't read them, so you didn't know that you're not obligated to comment on everything you read on the internet and you're even encouraged not to comment on things you haven't read. It saves the rest of us time not having to read your meaningless comments, like this entire thread.

Re: Re:

Re: tl;dr

The English courts excused, on policy grounds, reviews, quotations, satires and the like under what we would today call fair use, but they also created a closely related exception called "fair abridgment." We would call a fair abridgment an infringing derivative work today, although it is only since 1909 that there was a general derivative right in the United States. Fair abridgments were recognized as early as 1740.

Patry goes on to say:

... somewhere along the way, and quite recently, we adopted a very different view of intellectual property, one in which those who use parts of a work are per se deemed infringers unless they can skate through on some "technicality," like fair use, and only rarely then in order not to disturb property rights.

Re: Re: Re:

You raise an interesting point. When most large bubbles break they hurt the entire economy. However, the IP bubble bursting might actually invigorate the economy as a whole. Some businesses would be hurt, but the industries those businesses are part of might actually have a surge of innovation and growth.

Disclosure: This comment has not been endorsed by the MPAA, RIAA, and the West Texas court system.

Re:

"It is obvious nobody will accept less profits even though they'll still be there."

This is the primary problem with any discussion of IP with a maximalist. There is a financial incentive for them to pass laws that give them more and stricter government-granted monopolies. There is a financial incentive for them to deny fair use. There is a financial incentive for them to respond to questions from consumers about (to quote John Fogerty) "how much should we give?... They only answer more! More! More!" There is a financial incentive for them to lie, to deceive, to propagandize, to pay shills and lobbyists and lawyers and politicians to push their agenda.

Re:

Two things:
1. in many ways this is what already happens in the pharma world with respect to known, viable products. The term of a patent, once it has received FDA approval, is usually less than 10 years (7, I think I read somewhere).

2. The question becomes how to protect the investment in research, development, and testing of unknown potential product. Without patent protection at the time of development, you run the risk of not being able to monetize that underlying research investment. Sort of a lottery-inside-a-lottery: the first lottery being initial investigation and the second being the race to FDA approval.

Finally, I'll also note that the FDA does have a protection scheme similar to what you're describing for "orphaned drugs" called the Orphan Drug Act which provides 7 years exclusivity for drugs with small markets. (http://en.wikipedia.org/wiki/Orphan_drug#Orphan_Drug_Act)

Re: Re: Re: Re:

Re: Re: Re: Re: tl;dr

For a blog post, it's long, it's dense, and deals with many different points at different levels. It would have been better broken up. It's easier to discuss ideas when they are given some space to breath, not piled one on top of another like trash.

Re: Re:

Patents do have some scientific specifications, making the research for the drug company valuable for education, or that is actually one of the thoughts behind patents. By having the patent approved, the science can keep on, while the exclusivity is at work on the marketable invension!

Unfortunately the patents on management, psychological tests, software and general ideas are really ruining that reasoning. The research aspects seemed like the most convincing reasoning for patents, but I completely agree that the definitions on what can be patented are far, far too wide for that aspect.

I see the research value as the thing that should be guiding where you can or cannot patent things.

The problems with copyrights

Yes, one of the main problems is the duration. In a world where most companies don't look far beyond the next quarter, and certainly not beyond five years, the only concern is whether something will be profitable within that timeframe and any residual income afterwards is just a bonus - one that isn't needed as an "incentive to create".

The other problem is a combination of complexity and scope of protection. Neither is a huge problem in itself, but complex laws mean that you need legal advice to determine whether what you're doing is permitted and the broad scope of copyright protection means that things that individuals do in their own homes may be infringing. That's a problem. We expect companies working with IP to have to hire IP lawyers, but not people at home. Either the law shouldn't regulate things that a reasonable person might do at home (this was the case with copyright law for a long time - the investment required to infringe copyright pretty much guaranteed that only businesses could infringe), or it needs to be vastly simplified so that it's easy to determine whether your conduct is permitted or not.

Independent Invention

The problem of copyright law is less acute than the problem of patent law, partly because copyright infringement is limited to deliberate copying; patent infringement does not require proof even that the infringer was aware of the patent that he was infringing.

I'm surprised you didn't point out this is exactly what an independent invention defense is supposed to fix.

Sane Patents

I think the biggest problems with the patent system currently derive from the combination of vastly broad, obvious, overlapping patents and far too many of them being issued.

If a person of "ordinary skill in the art" could produce your invention based on just hearing the title (or a decent one sentence description if the title is bad), then it is obvious and should be rejected (e.g., one-click ordering).

If such a person could not produce your invention after reading the entire patent, then you are trying to patent an idea, not an embodiment, and the patent should likewise be rejected.

Who are protecting?

Granted, with modern action movies often costing hundreds of millions of dollars to make, yet copiable almost instantanteously and able to be both copied and distributed almost costlessly, the need for copyright protection is comparable to that in the pharmaceutical industry.

The author still gets it wrong. If the law is set up to protect a specific form of "art" (blockbuster action movies), it becomes open to influence and corruption by established entities producing that particular form of art. Instead, the law should be as general as possible with few/no exceptions.

Clearly, the actual purpose of patent "protection" is not protection for the inventor.

The purpose is to require disclosure to protect society from inventions being kept secret. Keeping novel inventions secret would be bad and would not help society. The framers of the constitution knew this.

In exchange for full disclosure the inventor gets a limited period of exclusive rights, after which the patent is public domain to be used by anyone. That helps society.

As was touched on the contrast between pharmaceutical patents and software patents couldn't be more stark.

A programmer can develop something ridiculous that could be gotten through the simple minded examiners at USPTO in 15 minutes at a cost of $11. This actually happens.

It can even be obvious and non novel because the examiners just don't know. As they are attorneys they are comfortable with the "let the courts work it out" approach they have taken.

But that approach badly damages innovation and harms society.

Inventors often don't have the millions of dollars it would take to get a patent overturned because it's just obvious or even stupid. It happens every day.

A pharmaceutical invention however might require 5 or 10 years of research, experimentation, testing to bring to market. Hundreds of millions of dollars.

Without patents little of this would happen, investors would invest elsewhere. Clearly this is not in our best interest.

Re: Re: Re: tl;dr

Re: Re:

For one thing, it would be much more clear to everybody what is required to comply with the law. Since the default state is that nobody would be permitted to market a pharmaceutical without FDA approval, there'd be no threat of any number of hundreds of thousands "entities" deciding to take you to court for infringement of their patents. There would be a much greater degree of certainty about whether you are permitted to manufacture and market your product since the FDA would not be granting approval if your product encroaches upon an "inventors" exclusive monopoly.

Furthermore, the duration of the exclusive monopoly would not need to be "one-size-fits-all" and could be catered to address issues such as costs of development, level of innovation, and interests of public health.

Since FDA approval would not be an entitlement, mandatory licensing to other manufacturers could be prescribed for critical products; and market prices regulated when necessary to prevent abuse of the monopoly.

"As they are attorneys they are comfortable with the "let the courts work it out" approach they have taken."

There are likely some exceptions, but the vast majority of patent examiners are not attorneys. They are individuals who are schooled and experienced in the technical arts within which they work at the USPTO.

"I think "deliberate" is a slightly sloppy word choice here. He's correct that copyright requires (mostly) actual copying, but it need not be "deliberate" in the traditional sense. Law prof. John Tehranian has famously covered just how much we accidentally infringe on a daily basis. Posner seems to be suggesting that to infringe on copyright, you know you're infringing. "

No, you're just misreading him.

He said "deliberate copying". You criticize his statement as if he said "deliberate infringing. Posner seems to be suggesting that to infringe on copyright, you know you're copying. Not that you know you're infringing.